The story of industrial revolutions, after all, is a story of battles over control. A technology is invented, it spreads, a thousand flowers bloom, and then someone finds a way to own it, locking out others. It happens every time.

Take railroads. Uniform and open gauge standards helped the industry boom and created an explosion of competitors — in 1920, there were 186 major railroads in the US. But eventually the strongest of them rolled up the others, and today there are just seven — a regulated oligopoly.

Or telephones. The invention of the switchboard was another open standard that allowed networks to interconnect. After telephone patents held by AT&T’s parent company expired in 1894, more than 6,000 independent phone companies sprouted up. But by 1939, AT&T controlled nearly all of the US’s long-distance lines and some four-fifths of its telephones.

Or electricity. In the early 1900s, after the standardization to alternating current distribution, hundreds of small electric utilities were consolidated into huge holding companies. By the late 1920s, the 16 largest of those commanded more than 75 percent of the electricity generated in the US.

Indeed, there has hardly ever been a fortune created without a monopoly of some sort, or at least an oligopoly. This is the natural path of industrialization: invention, propagation, adoption, control.

We vaguely knew all of this from High School History, but too easily forget: at some level we are simply living through just-another business cycle.

We already know that companies like Apple and Google and Facebook are dominating their niches. But when it comes to Social Media Marketing providers — whether in the fields of monitoring, PR, advertising, customer response, etc. — we are still very early in the process of figuring out the long-term winners & losers. As Jay Baer recently noted:

Agencies realize how hot social media is, and they are scrambling to add social media expertise (real or imagined) to their services mix. In fact, a search for “social media agencies” on Google yields more than 41 MILLION matching Web pages. Sifting through that pile to separate the experts from the pretenders is a near impossibility.

What’s your take? Which Social Media Marketing vendors and agencies will be thriving 5 years from now? Who will be gone from the scene? If you care to make any predictions, share them with me in the comments!

Posted on: August 30, 2010 at 6:22 am By Todd Defren

25 Responses to “Which Social Media Marketing Agencies Will Thrive In 5 Years?”

Comments

I have to agree with many of the replies to the article and say that agencies that focus on strictly social media won’t thrive the way they may think. Social media is just one aspect albeit a necessary one of the overall puzzle of marketing your business in the online space.

No matter how much I am enthralled with social media, and all the possibilities, it’s hard to see the same opportunities for monopolies exist for social media as with railroads, electricity, and telephone service, each of which has the protection (moat) of licenses, governmental protection, etc.

“Social media courses will be established as part of curriculums in business schools and every young new marketer/communications major will be expected to understand the role of social media in business.”

Great point! This is going on right now at universities around the world and will be instated in 5 years time. When it does though, it will technically be mainstream and not as sexy or fast paced as it used to be. So are we teaching our students about history or how to change the future? Are we educating the young on what is or what will become? Based on this article social media will have become second nature to us all (never will happen!) and we won’t seem to have specialized agencies to focus on it because it will only make up a small portion of the other marketing/pr spectrum.

Lets look at it another way though. In 2006, you (Todd), released the “Social Media Press Release” which changed the playing field for all companies because it was the first template to focus on how to use social media in the “PR 2.0″ world – you were proactive and iterated in a brand new ecosystem. Now is the time to do that again. We can’t sit here and think what will happen to us because that’s not how companies survive.

The Web 1.0 may be dead and The Internet 2.0 is seeing the light at the end of the tunnel; we need to determine what happens next.

“Social media courses will be established as part of curriculums in business schools and every young new marketer/communications major will be expected to understand the role of social media in business.”

I completely agree and some universities are already ahead of the game. Here is an example of just one social media course that is available and pretty popular.

If you check on LinkedIn you’ll see many positive reviews on the course. Social media is definitely going mainstream and may beat out sliced bread as the next best thing

What a great question. One that will surely keep me up all night tonight so thanks Todd.

Everyone will have their guesses but in the end, it’s impossible to say who will be on top (or who will exist) in 5 years. Who has the most resources? Who is able to stay the most relevant and effective? How the market will change in five years? What new technology will be created? What new laws will be created?

Of the companies that do survive, what will they look like? If all the best small players are bought up by the bigger players, as shown in some of your examples, the end result will surely look much different from the social media focused agencies of today. They’ll be a blend of many different concepts and practices.

As social media tools mature, so will the business applications of these tools. Marketing is (and always will be) a game of perception and differentiation, regardless of the channels. It takes many forms but will exist on any platform where there is a market to be reached.

So here’s my guess (and it is just a guess). People will still be using social media tools. They’ll look fairly different but will be based on the same principals of tools that exist today. Social Media agencies will have matured by that point. Social media courses will be established as part of curriculums in business schools and every young new marketer/communications major will be expected to understand the role of social media in business.

Spam will became a major issue for consumers, as it does on any mature communication channel. Professionals will probably come up with a bunch of new buzzwords to make it seem like the mature channels are new again and require specialized expertise.

The agencies/professionals who continue to exist and succeed will be the ones that can adapt to these factors of maturation. They’ll continue to impact consumer perception with innovative campaigns and a thorough understanding of the consumer’s use of the social platforms of their time.

I enjoyed this post and want to agree with both Jay Baer and Lauren Vargas. I think that agencies that act as ‘Follower Farms’ will fade out, and agencies that can effectively use social as part of their overall mix will not only survive but thrive. For so many businesses, social is going to be one of the biggest sources for customer service and PR, and agencies can show value more in the strategy / training end than by trying to be some kind of outsourcing service. Companies will (and should) have point people internally that work with the agency to assess effectiveness, work on outreach and benchmark campaigns.

I agree with Jay, those who measure will win. I also think companies need a long-term vision of where they want to be. Those digital agency’s listed will be around as long as they provide value and don’t become complacent. You almost need a hybrid plan that focuses the power of Jim Collins’ Good to Great and Smith and Brogan’s Trust Agents….The Ultimate Business Strategy! The fundamentals don’t change, just the arena they are applied in.
Good thoughts!
Cheers,
Jeph

The people (and the agencies) who act as if tools and tactics are strategies will lose. Those who instinctively think strategically and implement the tactics appropriate to the strategy (and the market) will win. This is the same as it ever was. Regis McKenna used to chuckle at the companies (and agencies) who believed that more press releases would equate to more ink. Things haven’t changed. There are those out there who have everyone fearing that if you don’t Tweet “x” times a day, or update this or that page on the social Web, you’ll curl up and die. This is total bullsh!t. The elements that make a client’s value proposition relevant and compelling to a market are the same in the age of Zuckerberg as they were in the time of Gutenberg: Your value prop is compelling ONLY to the extent that your product’s benefit exceeds its adoption cost plus its pricetag. Autodesk tools may have changed the way architects work, but the principles of architecture are the same today as when Egyptians buildt pyramids and Greeks built temples. Guess what? The same applies to marketing and selling. Another way to look at it: DOG = what motivates your buyer. TAIL = the tool for best outreach. Don’t let the latter wag the former.

Great Article.
I agree to an extent with Stuart and Arianna- Consolidation will occur as social media becomes more of a defacto element of successful company culture.
A few other factors that may contribute.
1)- Funding- If you look to the general trend of the explosive growth of social media companies in the last few years, many are venture/ angel backed, and are therefore built for the purpose of being sold. Furthermore, if you are able to look inside the culture of these companies, they are simply not being built to run for the long haul.Growth trumps stability.
2)- Commoditization- It stands to reason that there will be downward pressure on the cost model for the provision of technologies and support services for social media. This will inevitably lead to M&A activity, and only the strongest,best positioned,best run will survive.

Stick with your Gutenberg example. It’s the one that’s most relevant. All of the others (telephone, railroad) needed huge capital investments that made growing outside of the local market prohibitive. That’s one of the reasons why AT&T was able to centralize that market (remember, copper was expensive back then and one of the big challenges in the early telephone days was that people would climb up the poles and steal the copper).

A printing press was a much more affordable proposition. When you think of the amazing amount of newspapers and flyers over the last 200 years in this country, it’s only in the last 50 that any true consolidation (and collapse of the business) has impacted the number of actors.

The long term winners will be those who are able to connect social media to the core business and the way it communicates both internally and externally. The winners will develop processes for enabling social internally so that companies can, more or less, easily implement a change to its operating practices.

Everyone else will just use social media as old marketing but with a new channel. And that is anything but revolutionary.

Those vendors who make it all about the social scene (who’s who game) will not survive. Those who focus on business process and how the social layer is integrated across the entire enterprise and align wares with business objectives will make it. Those who thrive will be those who keep an ear to the ground, but will not hesitate to push the envelope.

I think that all PR, Marketing, and social media firms or agencies really have to work hard to justify their expense. Those that can show that they provide value will survive, and those that cannot will disappear.

Ultimately, I think some sort of hybrid model will win out. Either traditional agencies will be able to successfully integrate social media into their offerings, or social media firms will expand into what are considered traditional PR/Marketing agency services.

I think what you’re going to find is that hybrid model is already dominating the industry. There are very few “social media” specialists anymore; most of them are rolled up with SEO and other multi-marketing channels. That means that companies that go looking for social media expertise are also being handed PR expertise, advertising experience, online marketing skills and much, much more.

Which social media firms will survive? As the need to increase value continues to plunge ahead, I suspect we’re going to find that the answer is-none of them. They’re either going to shift and adapt, as cable companies have when they added Internet to their line-up of options, or they’re going to quietly fade away.

My take? The companies – vendors, agencies, or otherwise – that will endure this shift will be those that not only can keep score (like Jay said), but that can wire social media into other areas of the business. In other words, its those that understand and can take a horizontal approach to it as much as a vertical (read: communications alone) one.

That means building systems *within* systems so that we have social media as a supportive framework of information, of relationships and touchpoints, of insights and the voice of the customer, of strategic ways to get back out and connected with those people. Not just a tack-on to our direct marketing and promotion efforts.

It’s not an easy shift, but it’s one that I still believe holds a great deal of promise. It’s not the toolbox that’s going to make someone different or sustainable. It’s the house they build with the tools that are familiar.

That means building systems *within* systems so that we have social media as a supportive framework of information, of relationships and touchpoints, of insights and the voice of the customer, of strategic ways to get back out and connected with those people. Not just a tack-on to our direct marketing and promotion efforts.

I’ll probably regret this – but I agree with Stuart. If we’re still talking about “social media” as a distinct category in five years, I’d be surprised. It’s just going to be communications and marketing with social media as a necessary component. Kind of like media relations is part of PR or media buys are part of advertising. I like to think that social media is really just communications moving to the web – with all of the complications that come with a sea change. But is it really more complicated than that?

The difference between railroads, telephones, and social is media is that social media sites are free, but that may not change the cycle of history. Even if the main cost for social media marketing is the time investment, as the more successful firms find ways to cut down on their own time investment through automation smaller firms might find it difficult to keep up.

Social media will be folded into the culture of companies and agencies to such an extent that no need for specialization will exist anymore. I’m sure some agencies/companies will continue to specialize…but for the most part? I’m guessing they just get absorbed.